This paper argues that observed long lags in innovation implementation rationalize Schumpeter's statement that “wave-like fluctuations in business ... are the form economic development takes in the era of capitalism.” Adding implementation delays to an otherwise standard endogenous growth model with expanding product variety, the equilibrium path admits a Hopf bifurcation where consumption, R&D and output permanently fluctuate. This mechanism is quantitatively consistent with the observed medium-term movements of US aggregate output. In this framework, an optimal allocation may be restored at equilibrium by the mean of a procyclical subsidy, needed to generate additional consumption smoothing. Finally, a procyclical R&D subsidy rate designed to half consumption fluctuations will increase the growth rate from 2.4% to 3.4% with a 9.6% (compensation equivalent) increase in welfare.

To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.

References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

When requesting a correction, please mention this item's handle: RePEc:bge:wpaper:533. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruno Guallar)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through
the various RePEc services.